Valsts ieņēmumu dienests v SIA “Altic”. Request for a preliminary ruling from the Augstākā tiesa. Reference for a preliminary ruling — Value added tax (VAT) — Directive 2006/112/EC — Procurement of food products — Deduction of input tax — Refusal of deduction — Possibly fictitious supplier — VAT fraud — Requirements relating to knowledge on the part of the purchaser — Regulation (EC) No 178/2002 — Obligations of traceability of foodstuffs and identification of the supplier — Regulations (CE) No 852/2004 and (EC) No 882/2004 — Registration obligations of operators in the food sector — Effect on the right to deduct VAT. Case C‑329/18.
ECLI identifier: ECLI:EU:C:2019:831
In Case C‑329/18, REQUEST for a preliminary ruling under Article 267 TFEU from the Augstākā tiesa (Supreme Court, Latvia), made by decision of 10 May 2018, received at the Court on 17 May 2018, in the proceedings
Valsts ieņēmumu dienests v ‘Altic’ SIA,
THE COURT (Third Chamber), composed of A. Prechal, President of the Chamber, F. Biltgen (Rapporteur), J. Malenovský, C.G. Fernlund and L.S. Rossi, Judges, Advocate General: M. Bobek, Registrar: M. Aleksejev, Head of Unit, having regard to the written procedure and further to the hearing on 6 March 2019, after considering the observations submitted on behalf of
| – | ‘Altic’ SIA, by A. Purmalis, advokāts | | – | the Latvian Government, by I. Kucina and V. Soņeca, acting as Agents | | – | the Spanish Government, by L. Aguilera Ruiz, acting as Agent | | – | the European Commission, by L. Lozano Palacios, J. Jokubauskaitė and A. Sauka, acting as Agents |
after hearing the Opinion of the Advocate General at the sitting on 22 May 2019, gives the following Judgment
| 1 | This request for a preliminary ruling concerns the interpretation of Article 168(a) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1), as amended by Council Directive 2010/45/EU of 13 July 2010 (OJ 2010 L 189, p. 1) (‘Directive 2006/112’). | | 2 | This request was made in the context of a dispute between the Valsts ieņēmumu dienests (Latvian tax administration; ‘the tax administration’) and ‘Altic’ SIA concerning a payment demand made to Altic for the amount of value added tax (VAT) on the purchase of rapeseed paid upstream and deducted by Altic, together with a fine and default interest. | | 3 | Under Article 168(a) of Directive 2006/112: ‘In so far as the goods and services are used for the purposes of the taxed transactions of a taxable person, the taxable person shall be entitled, in the Member State in which he carries out these transactions, to deduct the following from the VAT which he is liable to pay: (a) the VAT due or paid in that Member State in respect of supplies to him of goods and services, carried out or to be carried out by another taxable person.’ | | 4 | Article 178(a) of that directive provides: ‘In order to exercise the right of deduction, a taxable person must meet the following conditions: (a) for the purposes of deductions pursuant to Article 168(a), in respect of the supply of goods or services, he must hold an invoice drawn up in accordance with Sections 3 to 6 of Chapter 3 of Title XI.’ | | 5 | The first paragraph of Article 273 of that directive states: ‘Member States may impose other obligations which they deem necessary to ensure the correct collection of VAT and to prevent fraud, subject to the requirement of equal treatment as between domestic transactions and transactions carried out between Member States by taxable persons and provided that such obligations do not, in trade between Member States, give rise to formalities connected with the crossing of frontiers.’ | | 6 | Recitals 28 and 29 of Regulation (EC) No 178/2002 of the European Parliament and of the Council of 28 January 2002 laying down the general principles and requirements of food law, establishing the European Food Safety Authority and laying down procedures in matters of food safety (OJ 2002 L 31, p. 1), state: ‘(28) Experience has shown that the functioning of the internal market in food or feed can be jeopardised where it is impossible to trace food and feed. It is therefore necessary to establish a comprehensive system of traceability within food and feed businesses so that targeted and accurate withdrawals can be undertaken or information given to consumers or control officials, thereby avoiding the potential for unnecessary wider disruption in the event of food safety problems.’ and ‘(29) It is necessary to ensure that a food or feed business including an importer can identify at least the business from which the food, feed, animal or substance that may be incorporated into a food or feed has been supplied, to ensure that on investigation, traceability can be assured at all stages.’ | | 7 | For the purposes of that regulation, Article 3, point 15, thereof defines the term ‘traceability’ as ‘the ability to trace and follow a food, feed, food-producing animal or substance intended to be, or expected to be incorporated into a food or feed, through all stages of production, processing and distribution’. | | 8 | Under the third paragraph of Article 17(2) of the regulation: ‘Member States shall also lay down the rules on measures and penalties applicable to infringements of food and feed law. The measures and penalties provided for shall be effective, proportionate and dissuasive.’ | | 9 | Article 18 of the same regulation, entitled ‘Traceability’, reads as follows: ‘1. The traceability of food, feed, food-producing animals, and any other substance intended to be, or expected to be, incorporated into a food or feed shall be established at all stages of production, processing and distribution. 2. Food and feed business operators shall be able to identify any person from whom they have been supplied with a food, a feed, a food-producing animal, or any substance intended to be, or expected to be, incorporated into a food or feed. To this end, such operators shall have in place systems and procedures which allow for this information to be made available to the competent authorities on demand. …’ | | 10 | Article 6(2) of Regulation (EC) No 852/2004 of the European Parliament and of the Council of 29 April 2004 on the hygiene of foodstuffs (OJ 2004 L 139, p. 1), provides: ‘In particular, every food business operator shall notify the appropriate competent authority, in the manner that the latter requires, of each establishment under its control that carries out any of the stages of production, processing and distribution of food, with a view to the registration of each such establishment. Food business operators shall also ensure that the competent authority always has up‑to‑date information on establishments, including by notifying any significant change in activities and any closure of an existing establishment.’ | | 11 | Article 31(1) of Regulation (EC) No 882/2004 of the European Parliament and of the Council of 29 April 2004 on official controls performed to ensure the verification of compliance with feed and food law, animal health and animal welfare rules (OJ 2004 L 165, p. 1), provides: ‘(a) Competent authorities shall establish procedures for feed and food business operators to follow when applying for the registration of their establishments in accordance with Regulation (EC) No 852/2004 …’ | | 12 | Article 10(1)(1) of the Law on VAT, in its version in force on the date of the facts in the main proceedings, is worded as follows: ‘Only a taxable person registered with the [tax administration] shall be entitled, in his VAT return, to deduct from the amount of tax to be paid to the Treasury, as input tax, the amount of tax shown on invoices received from other taxable persons for goods acquired or services received in order to carry out his own taxable transactions, including transactions carried out abroad which would have been taxable if they had been carried out in the national territory.’ | | 13 | Article 10(12) of that law provides: ‘The amount of tax indicated on invoices relating to goods and services received shall be deductible after receipt of the invoice relating to the said goods and services received, or after payment of the amount of tax indicated on the invoice as an advance.’ | | 14 | Altic purchased rapeseed from ‘Sakorex’ SIA during the months of July and August 2011 and from ‘Ulmar’ SIA in October 2011. It is apparent from the order for reference that those companies contacted Altic, referring to Altic’s media and internet advertisements. That rapeseed was received and stored in a warehouse owned by ‘Vendo’ SIA. Altic deducted the VAT paid on those purchases. | | 15 | Following an audit carried out at Altic, the tax administration took the view that the purchase transactions had not actually taken place. It ordered Altic to pay to it the VAT deducted, together with a fine and default interest. | | 16 | The District Administrative Court, Latvia, upheld the action brought by Altic for annulment of the tax administration’s decision. The decision of that court was confirmed by the Regional Administrative Court, Latvia. | | 17 | The latter court noted that it was not in dispute that the rapeseed had been received in the warehouse on the dates and in the quantity indicated in Vendo’s accompanying documents. It held that, in the circumstances, Altic acted in good faith and relied fully on the ability of Sakorex and Ulmar to deliver the contracted goods, an ability which Altic was not responsible for verifying. In that regard, the tax authorities did not state which specific actions arising from the relevant rules Altic had failed to take to carry out such verification. | | 18 | The tax administration appealed in cassation to the referring court, namely the Supreme Court, Latvia. It argues that, in accordance with Regulation No 178/2002, food business operators must be able to identify any substance intended or likely to be incorporated into food or feed and must, to that end, have systems and procedures in place to make the information available to the competent authorities. However, Altic did not carry out any minimum checks on its contracting partners or ascertain that they were registered with the Latvian Food and Veterinary Agency. That means that Altic knew or should have known that it was involved in a misuse of the common system of VAT. | | 19 | According to the referring court, it is not in dispute that there are indications that Sakorex and Ulmar are fictitious undertakings and that the origin of the goods in question cannot be established. Consequently, the question arises as to whether Altic knew or should have known that the transactions in question in the main proceedings amounted to VAT fraud. | | 20 | In that regard, the referring court notes that there is no evidence to confirm that the rapeseed purchased was exclusively intended for use in the production of fuel, as alleged by Altic, or at least that it was in no way linked to the food chain. Consequently, there is support for the view that, as regards those operations, Altic was required to comply with the provisions of Regulation No 178/2002. | | 21 | That court states that Article 18 of that regulation lays down the general principles for the traceability of foodstuffs and the identification of their suppliers. With regard to that identification, it notes that, although that regulation does not specify to what extent an undertaking must identify its supplier, it follows from the Guidelines for the implementation of Articles 11, 12, 14, 17, 18, 19 and 20 of Regulation No 178/2002 of 26 January 2010, in the Conclusions of the European Commission’s Standing Committee on the Food Chain and Animal Health, that undertakings are required to keep information on the name and address of the supplier of the product and on the product identification. | | 22 ... | | 41 ... | | 49 | Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. | | | On those grounds, the Court (Third Chamber) hereby rules: | | 1 | Article 168(a) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, as amended by Council Directive 2010/45/EU of 13 July 2010, must be interpreted as precluding a taxable person who participates in the food chain from being refused the right to deduct input value added tax (VAT) on the sole ground, assuming that it has been duly established, that that taxable person has not complied with his obligations under Article 18(2) of Regulation (EC) No 178/2002 of the European Parliament and of the Council of 28 January 2002 laying down the general principles and requirements of food law, establishing the European Food Safety Authority and laying down procedures in matters of food safety, to identify his suppliers for the purposes of traceability of foodstuffs, which it is for the referring court to ascertain. Non‑compliance with those obligations may, however, constitute one element among others which, taken together and in a consistent manner, tend to show that the taxable person knew or should have known that he was involved in a transaction involving VAT fraud, which it is for the referring court to assess. | | 2 | Article 168(a) of Directive 2006/112, as amended by Directive 2010/45, must be interpreted as meaning that the failure, by a taxable person who participates in the food chain, to ascertain that his suppliers are registered with the competent authorities, in accordance with Article 6(2) of Regulation (EC) No 852/2004 of the European Parliament and of the Council of 29 April 2004 on the hygiene of foodstuffs and Article 31(1) of Regulation (EC) No 882/2004 of the European Parliament and of the Council of 29 April 2004 on official controls performed to ensure the verification of compliance with feed and food law, animal health and animal welfare rules, is not relevant for the purpose of determining whether the taxable person knew or should have known that he was involved in a transaction involving VAT fraud. |